AirAsia X to Offer Budget Flights Worldwide Out of Malaysia

Malaysian aviation tycoon Tony Fernandes on Friday launched a new long-haul budget airline named AirAsia X, which will start flying to destinations in China and Britain in July.

The new carrier is owned by Fly Asian Express, or FAX, a small airline serving rural routes in Malaysia, and will collaborate with AirAsia, which Fernandes, 42, rescued from bankruptcy in 2001 and turned into the region's biggest low-cost carrier. He owns part of both airlines.

"We are proud in being able to continue to lead and revolutionize aviation industry in Asia, just as we did with AirAsia," Fernandes said at the launching ceremony.

"Ultimately the launch of AirAsia X will bring independence to the long haul low cost traveler by providing a choice of service for their long-haul travel requirement."

He told a news conference AirAsia X expects 500,000 passengers in first year of operations, which will ultimately cover China, India, Europe, Australia, Asia and the Middle East.

Average ticket prices will be about half the price of full service airlines, he said.

Online sale of tickets will begin next month for initial service to Tianjin and Hangzhou in China, and to either Manchester or London in the United Kingdom. If AirAsia X ends up flying to London, it will operate from Stansted airport, said Fernandes, who is the majority owner of FAX with a 50 percent stake.

Under a 30-year franchise, AirAsia X will use the AirAsia brand, its Web site for bookings and other services. But AirAsia X, which will cover destinations which are more than four hours flying time from Kuala Lumpur, will maintain its own fleet and staff.

Fernandes said AirAsia X is expected to buy 20 aircraft, either Boeing 777-300ER or Airbus 330-300, with shareholders' money. A decision on the type of aircraft will be made by the end of the month.

AirAsia's board is considering taking a 20-30 percent stake in FAX but hasn't made a decision yet, he added.

At the same press conference, AirAsia's executive director Kamarudin Meranun told reporters AirAsia may buy another 100 Airbus 320 planes for its long-term needs and hopes to conclude talks on pricing and delivery by the end of the month.

That would double the existing order for AirAsia, which has already committed to buy 100 single-aisle A320s from the European jet maker.

Based on list prices, the order would be valued at $6.7 billion, but aircraft suppliers usually give discounts to their customers for large orders.

"We are looking at a maximum 200 planes, including the 100 firm orders," Kamarudin told reporters. "We are still talking...we hope to finalize before the end of the month."

AirAsia has about 40 jets now, and expects passenger volume to hit 18 million in 2007, from around 15 million in 2006.

"Within the next 7 years, I am convinced we (AirAsia) will be the largest airline in the world with 50 million passengers a year," Fernandes said.

AirAsia X plans to tie-up with other low-cost carriers to boost connectivity but talks of an alliance with either U.K.-based Virgin Atlantic and easyJet PLC are premature, he added.

Transport Minister Chan Kong Choy hailed the new airline as a "historic" venture which will give impetus to the Malaysian economy by boosting tourism.

Chan told reporters AirAsia X is unlikely to have an impact on flag carrier Malaysia Airlines because their routes don't clash.

If successful, analysts said FAX will give Malaysia a leg up over rivals Singapore and Bangkok as the regional hub for low-cost airlines.

"The structure is good. It is a phenomenal development that will put Malaysia at the forefront of the global aviation industry," said Muhamad Khair Mirza, AmResearch analyst.

Fly Asian Express will be the latest airline in Asia to operate budget long-haul flights after Oasis Hong Kong Airlines began flights to London from Hong Kong in October. It currently operates Fokker 50 and Twin Otter turboprop planes in rural Malaysia. It started operations in August when AirAsia subcontracted its rural air rights.

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